By Danny Shaw
BBC home affairs correspondent
Mr Reid will retain control of policing in England and Wales
After becoming Home Secretary in May 2006, it took John Reid just a few weeks to realise that his department was too big and needed restructuring.
First he had the foreign prisoners fiasco to deal with, then a backlog of asylum claims; next came a succession of inmates absconding from open jails, and most recently, he's had to sort out the Home Office's failure to log details of foreign convictions.
All this on top of the prison overcrowding crisis - Mr Reid has complained that he spends nights at the Home Office trying to ensure there are enough places in the system.
It's all important work, of course - bread and butter to home secretaries in the past.
But it's proving to be a distraction to what Mr Reid believes to be his priority: countering the threat from terrorists.
As the Cabinet minister responsible for the police and the security service MI5, the home secretary already plays a critical role in overseeing anti-terrorism work and keeping up-to-date on the latest intelligence.
It's also his job - a time-consuming one at that - to sign off control orders and telephone taps.
What the new structure will allow for is Mr Reid to focus on terrorism, with a dedicated national security office within the Home Office, containing 350 staff.
For the first time, the Home Office will lead on counter-terrorism strategy; the Cabinet Office previously performed this function, but there've been grumblings within Whitehall about its effectiveness.
Until now, there've been a myriad of committees, sub-committees and sub-sub committees - some with ministers, others with officials - dealing with various aspects of security and terrorism. There've been no clear lines of accountability or communication.
The new arrangements aim to simplify that, with a security committee chaired by the prime minister meeting monthly, and a weekly group headed by the home secretary.
At a stroke, Mr Reid is also waving goodbye to those areas which have caused him most problems - offender management and prisons, which are again chronically overcrowded.
It means that he'll not have to face the politically embarrassing prospect of releasing prisoners early - he said it would never happen "on my watch" - which some officials believe is almost inevitable.
Instead, prison overcrowding will be for the new secretary for justice to deal with - Lord Falconer in the short term, and then, most likely, a minister who sits in the House of Commons.
Criminal justice policy will be spread across three government departments as it is now (Home Office, Justice Ministry and Attorney General's office).
But there's a crucial difference because policing stays in the Home Office - separate from the other branches of public protection which move to the Justice Ministry.
Bridging that divide may give John Reid some sleepless nights to come.